The new executive compensation disclosure rule significantly improves the ability to make more detailed comparisons of pay across companies and industries, corporate governance experts say.
That will help shareholders spot and try to deter excesses and abuses, and promote compensation plans that better align corporate management interests with shareholders, said Patrick McGurn, special counsel, executive vice president and director-corporate programs at Institutional Shareholder Services Inc., Rockville, Md.
"I don't think investors think a lot is missing" from the rule, adopted by the Securities and Exchange Commission Aug. 11 and expected to become effective by the 2007 proxy season. Mr. McGurn said. "There are not obvious holes. Shareholders can now make apples-to-apples comparisons across companies and industries.
"The comparability of pay will be significantly enhanced."
The SEC said the 436-page rule, which amends existing disclosure requirements, is "intended to provide investors with a clearer and more complete picture of compensation" to principal executive officers and other highest-paid executive officers and directors. The new rule requires that "all elements of compensation must be disclosed," according to the SEC document. The SEC notes in its new rule it "sought to structure the revised requirements sufficiently broadly so that they will continue to operate effectively as new forms of compensation are developed in the future."